BUSINESS

US wholesale businesses boosted stockpiles 0.5 per cent in August and sales rose 0.9 per cent

10/10/2012 10:22 EDT | Updated 12/10/2012 05:12 EST
WASHINGTON - U.S. wholesalers increased their stockpiles in August and their sales rose for the first time in four months. The gains could provide a boost to the still-weak economy.

The Commerce Department said Wednesday that wholesale stockpiles grew 0.5 per cent in August after a 0.6 per cent increase in July. Sales jumped 0.9 per cent in August, ending three months of declines. The sales increase was the biggest one-month gain since February.

Total wholesale inventories stood at $487.5 billion. That's 26.9 per cent higher than the post-recession low hit in September 2009.

It would take about five weeks to exhaust the stockpiles at the August sales pace. Steven Wood, chief economist at Insight Economics, said the level remains fairly lean, even after the modest increase in inventories over the summer when sales slipped.

Companies typically boost their stockpiles when they anticipate sales will rise in coming months. Faster restocking helps drive economic growth. When businesses order more goods, it generally leads to more factory production.

Growth has slowed this year, in part because high unemployment and low pay increases have kept U.S. consumers from spending more freely. Weaker global growth has also dampened demand for U.S. exports.

Many economists believe the U.S. economic growth has hovered near a 2 per cent annual rate during the July-September quarter. That would be only a slight improvement from the tepid 1.3 per cent annual growth rate in the previous quarter.

A stronger job market could help boost growth in the final three months of the year. When more people find jobs, consumer spending grows. Consumer spending accounts for nearly 70 per cent of economic activity.

The government reported on Friday that the unemployment rate fell in September to 7.8 per cent, down from 8.1 per cent in August. The rate fell because a government survey of households found that 873,000 more people had jobs, the biggest jump since January 2003. Still, economists expect only modest job gains in the coming months.